Energy minister Angus Taylor has made his intentions clear: Underwrite investment in new coal or gas generation before the next election is called. Because he knows it won’t happen under what he calls a Labor/Greens government.
In an opinion piece written for The Australian on Wednesday, ahead of a meeting with retailers over electricity prices, and a separate briefing about the government’s proposed underwriting agreement, Taylor underlined the urgency to sign up new investment.
“We are working towards a shortlist of electricity generation investment projects by early next year that deliver when customers need it (likely to include coal, gas and hydro), balancing the unprecedented investments in solar and wind,” Taylor wrote.
“These new projects will drive increased competition and supply to enhance affordability and reliability.
“We need project proponents to sharpen their pencils, bringing forward bankable projects as quickly as possible. We recognise government has no choice but to play a role in underwriting these investments, given the distorted history of this sector, and the unavoidable political risks of future Labor-Greens policies.”
Taylor has already indicated that the Morrison government is prepared to indemnify any new coal and gas plants against the risk of carbon pricing in the future, an extraordinary move that has been slammed by the likes of Oliver Yates, the former head of the Clean Energy Finance Corporation.
“If [Mr Taylor] thinks the taxpayer should take a risk that the private sector is unwilling to take then that’s extraordinary … Is it irresponsible for the government to take that risk? In this circumstance it is,” Yates told Fairfax Media, pointing out that it shattered the government’s pretense that the tender was “technology neutral”.
Taylor’s spokesman said the government expected to have some 50 people from 23 different organisations at the briefing, which was due to start in Sydney at 2.30pm. (RenewEconomy will update later today or Thursday morning).
The government has called for submissions about the tender design by the end of this week, wants to run an EOI (expressions of interest) over Christmas and the New Year, and a formal tender in March so a contract can be written before a caretaker period begins, likely in mid-April.
Taylor also insists the underwriting proposal is about increasing competition, but the government has also ditched an ACCC recommendation that would bar any party that already holds more than 10 per cent of a single market.
It’s not the only recommendation from the ACCC that the government is proposing to ditch to suit its pursuit of new investment in fossil fuels.
Taylor wants to open the program to existing coal plants to extend their life (the ACCC suggested only new generation);
- Taylor is suggesting government funding from year 1 (the ACCC suggested years 6-15 to fill in a gap in the corporate contracting market);
- Taylor also proposes that customers are not required (the ACCC suggested that three customers should be locked in);
Taylor is imposing no emissions barrier to the new investment, saying only that a single plant should not push Australia beyond its Paris target. Considering that even Taylor admits that the inflow of wind and solar will meet the sector’s share of that target, then this is meaningless.
- And Taylor has also suggested a range of funding options, including capacity payments that may serve to protect all coal and gas generators. This is a policy instrument that has been pushed by the existing energy oligopoly for years, despite it being viewed in most quarters as an un-necessary and inefficient fossil fuel subsidy.
Yet, the minister complained that the big generators – now apparently allowed to join the queue for a government subsidy – were pushing up prices using their market power; whether by cutting out competitors, inflating regulated network prices, shutting down capacity prematurely or charging excessive late payment penalties.
One of his complaints is about the 5GW of baseload capacity lost through closures of ageing coal generators not being replaced. Everyone in the market knows that too much base-load was built, due to lousy forecasts that assumed total demand would grow substantially. It hasn’t, largely due to increased efficiency and the emergence of rooftop solar.
Last week, the NSW government launched a new program for “emerging renewables” that is looking for technologies that will help renewables replace the 70 per cent of its remaining coal fleet that is due to retire in the next 15 years.
Nowhere in the presentation by this Coalition state government was there any mention of new coal or baseload, nor is it mentioned in the AEMO report that forms a 20-year blue-print for the transition – it is simply not needed. Dispatchable generation is needed, but not baseload, even the big generators have moved on from this last century notion of grid management.
Taylor’s piece in The Australian made clear the government would not respond to hard right calls for the renewable energy target to be ditched, mostly because the subsidy involved will disappear in the next few years. And he says there is no need to quit the Paris climate pact, because the electricity sector will meet its share of emissions.
But he does continue the government drum-beat about the impact of renewables on wholesale prices, insisting that reliability is at stake and that Labor’s 50 per cent renewable energy target for 2030 will push up prices.
Here, it’s important to note that AEMO has estimated business-as-usual will push the share of renewables to around 46 per cent by that date, based on current Victoria and Queensland targets and the growing uptake of rooftop solar.
In a press conference at the end of the first meeting on Wednesday, Taylor said his discussion with the retailers had been “extremely productive and constructive,” with companies agreeing to standardise retail offers, and to discard what Taylor described as the “loyalty tax” on consumers.
“We’ve seen today an initiative put forward by the energy companies to standardise comparison rates for all customers.
“That means that a discount from one company will be absolutely comparable with a discount from another company. Customers will be able to measure apples against apples,” he said.
“That standardisation is absolutely crucial to ensure that the confusion goes and customers can get their best possible rate.
“We also made clear to energy companies that we expect that loyalty tax to be gone by the 1st of July this year, (with a) down-payment on the 1st of January.”
Asked whether this guaranteed a power price reduction on January 1 2019, Taylor responded:
“The industry knows we’re serious and for that reason, I’m confident they’ll be serious too.
“…If we have to use a big stick we will. We will do what it takes.”